ACCA FM WACC: 5 Errors That Wreck Your NPV (June 2026)

One WACC error wrecks the whole NPV

Get one input wrong in WACC and every cash flow you discount with it is junk. The FM March/June 2025 examiner flagged the same five errors again. They are easy marks — and easy to lose.

Error 1: Book values instead of market values

The single biggest WACC mistake. Candidates pull equity and debt straight off the statement of financial position and weight WACC with them. Wrong. WACC weights must be market values — equity at share price × shares in issue, debt at the bond's market value per $100 nominal. The MJ25 report flags this as a recurring error. Book values mis-weight the average and the answer is wrong from line one.

Error 2: Coupon rate treated as the cost of debt

The coupon is what the bond pays, not what the bond costs. If a 6% bond trades at $96 and matures in 5 years, the cost of debt is the IRR of the after-tax cash flows against $96 — not 6%. Writing "Kd = coupon" is one of the most common scripts the examiner sees and it costs at least 2 marks before the NPV even starts.

Error 3: Forgetting the tax shield

Cost of debt in WACC is post-tax: Kd × (1 − T). Skip the tax adjustment and WACC is overstated, the discount factor is too harsh, and a positive-NPV project gets rejected. The examiner names this in nearly every report. It's one multiplication. Don't miss it.

Error 4: Equally weighting equity and debt

WACC is a weighted average. Some scripts add Ke and Kd and divide by 2. That only works if equity and debt have identical market values, which they almost never do. Weight each cost by its market-value share of total capital.

Error 5: Mixing units

$000 in one column, $ in another, % in another. The decimal place ends up in the wrong place and the whole WACC is wrong. Pick one unit at the top of the question and stick to it for every line.

Wrong vs right — the 30-second example

Equity: 10m shares at $4. Debt: $5m nominal 6% bond, market price $96, tax 20%, redeemed at par in 5 years.

Wrong: "Equity $5m (book), Debt $5m (book). WACC = (10% + 6%) ÷ 2 = 8%."

Right: Equity market value = 10m × $4 = $40m. Debt market value = $5m × 96/100 = $4.8m. Kd post-tax = IRR of after-tax cash flows on $96, then × (1 − 0.2). Weight Ke by 40/44.8 and Kd by 4.8/44.8. Different number, every time.

What to do before June 2026

1. Practise Meen Co (SD25) on the ACCA Practice Platform — the SD24 examiner specifically recommends it for WACC and cost of debt.

2. Build a single WACC template: market value of equity, market value of debt, Ke, Kd post-tax, weights, WACC. Use it every time. Muscle memory beats panic.

3. On every WACC question, write "market values" at the top of the page before you do anything. It's the one note that stops Error 1.

Bottom line

FM Section C investment appraisal is 20–25% of the paper. WACC sits inside almost every Section C NPV question. Get the five inputs right and you protect every mark in the discount factor column. Get one wrong and you can't recover. Fix the inputs. The NPV looks after itself.